By Khiara Elliott
CBD property owners are facing massive land tax hikes and may be further hit if recommendations are adopted for another metro rail project.
Land tax assessments for 2017 based on councils valuations for 2016 predict that some land tax bills will increase by as much as 180 per cent.
According to figures provided by CBRE, the land value of Exhibition St is up by 160 per cent, and Queen St by 156 per cent, more than 10 times the state average.
This increase is largely due to the purchase of the Telstra site by Malaysian developer SP Setia, for a staggering $101 million.
CBRE data also suggests that a land value increase of 50 per cent would create a land tax increase of 57 per cent.
A report by Infrastructure Victoria and Ernst & Young suggests that if a future Metro 2 project was built, up to 30 per cent of its costs could be funded by taxing nearby property owners.
The suggested Melbourne Metro 2 project would connect Southern Cross Station to areas such as Clifton Hill, Newport, Parkville and Fishermans Bend via a new train tunnel through the CBD.
Infrastructure Victoria estimates that the total cost for the project would be in the range of $15-22 billion. Construction will occur over six years, starting in 2034.
The report says that tax figures were assessed on the nature of each project and its predicted productivity.
Analysis of the Melbourne Metro 2 project suggests that permanent increases in taxes “could be in the range of 20-30 per cent of project costs, with the majority following to the Federal Government and not the State Government as funder of the project.”
The report study considered the distance from the property to the railway station, the frequency of services at the station and the distance to the railway line when determining the impact of rail transport on real estate prices.
“It was found that dwellings very close to the station are on average about 25 per cent more expensive than those 15kms or more distant. This percentage ranges between 19 per cent for low frequency stations, and 33 per cent for high frequency stations,” states the report.
Key findings of the report indicated that more than one levy would potentially be needed to cover construction costs.
“The application of one or more betterment levies is the only way to generate significant funding in the order of 25 per cent of project costs,” it reads.
“The complexities involved in applying targeted betterment levies suggest that hybrid value capture/ tax mechanisms are required.”
The Infrastructure Victoria proposal drew a stern rebuke for the Property Council of Victoria, which pointed out that the property industry currently paid 54 per cent of Victorian taxes despite being only 11 per cent of the economy.
Executive director, Sally Capp, said the new taxes would increase house prices, business costs and rents at a time when these are already unaffordable for many.
“Under the betterment levy idea for Melbourne Metro 2, a 40,000 sqm office tower with a $21 per sqm rate will face a tax increase of approximately $800,000 each year for 30 years. Clearly, this is unsustainable,” she said.